On Oct 31, we downgraded our long-term recommendation on
), one of the largest rent-to-own operators, to Underperform
following the company's dismal operating performance during
third-quarter 2013 that led management to lower its full-year
earnings projection. The stock currently carries a Zacks Rank #5
Why the Downgrade?
Estimates for Rent-A-Center have shown a downtrend since the
company reported disappointing third-quarter results on Oct 21,
2013. The quarterly earnings of 51 cents a share missed the Zacks
Consensus Estimate of 63 cents, and fell 23.9% from the
prior-year quarter. Total revenue grew 2.1% to $754.8 million but
fell short of the Zacks Consensus Estimate of $773 million.
Comparable-store sales for the quarter dropped 0.8%,
reflecting a 5.1% decline in the Core U.S. segment.
The sustained deflation in electronic products along with
promotions undertaken to attract budget constrained consumers led
to the year-over-year decline in average revenue per agreement
and is the principal factor behind the drop in comparable-store
sales and trim in the guidance.
Management now envisions 2013 earnings in the band of $2.80 to
$2.85 per share, including a cost of 30 cents related to its
international expansion initiatives. Earlier, management had
projected 2013 earnings between $3.03 and $3.15 per share.
Consequently, we are witnessing a fall in the Zacks Consensus
Estimate, as analysts become less constructive on the stock's
future performance. The Zacks Consensus Estimate for fiscal 2013
fell by 9% to $2.83 and for fiscal 2014 it tumbled by 6% to $3.30
per share, over the past 30 days.
Other Stocks that Warrant a Look
Other stocks worth considering in the finance-leasing industry
Apollo Investment Corporation
) carrying a Zacks Rank #1 (Strong Buy), and
Capital One Financial Corp.
First Cash Financial Services Inc.
) both holding a Zacks Rank #2 (Buy).
APOLLO INV CP (AINV): Free Stock Analysis
CAPITAL ONE FIN (COF): Free Stock Analysis
FIRST CASH FINL (FCFS): Free Stock Analysis
RENT-A-CENTER (RCII): Free Stock Analysis
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